Incorporating ESG issues into investments
Alongside traditional financial risk/reward analysis techniques, the Group performs targeted screening to examine the sustainability policies, performance, practices and impacts of issuer companies, to avoid investing in companies that do not adhere to our principles.
We have drawn up criteria, systems and approaches to identify, evaluate and monitor investments that are most exposed to environmental, social and governance (ESG) risks. Specifically, the Responsible Investment Group Guideline applies to all direct investments by Group insurance companies.
We consider financial instruments to be high ESG risk investments if they are issued by companies that:
- produce weapons that, when used normally, violate fundamental humanitarian principles (cluster bombs, anti-personnel mines, nuclear weapons);
- are involved in coal sector;
- are involved in tar sands sector;
- are involved in serious or systematic violations of human rights;
- are involved in serious environmental damage;
- are implicated in serious instances of corruption.
The aim of the responsible investment process is to identify ESG risks arising from investments in companies involved in these activities, through ongoing monitoring of the investment universe.
According to their level of involvement and responsibilities in the abovementioned controversies, and based on an internal assessment, the companies are placed on either the Restricted List or the Watch List. The inclusion of a company on the Restricted List brings with it specific actions, including a ban on new investments in the company, the divestment of any equity exposure and the run-off of fixed income exposure. As regards the Watch List, actions range from the close monitoring of controversial aspects to direct engagement with the company in question in order to encourage it to act responsibly.
Our commitment to responsible investment also resulted in the establishment of the Group Responsible Investment Committee, which comprises representatives of the main functions involved in investment management. The Committee is in charge for supporting the GCIO in:
- integrating ESG criteria into the investment decision process;
- evaluating issuers not aligned with the ESG criteria set out by the Group and taking a decision regarding their possible inclusion in Restricted List or Watch List;
- discussing and reviewing the results of the monitoring activities of Group exposure to ESG risk from investment and following up on the implementation of GCIO decisions.